Used Vehicle Prices Begin to Fall in Advance of Labor Day

The average transaction prices for used vehicles are well off all-time highs achieved earlier this year.

Consumers shopping for a vehicle over the Labor Day holiday could find prices edging downward if they are looking for a used vehicle as a replacement for their current car, truck or SUV.

According to a review by Edmunds of more than 200 3-year-old vehicle models, 92.8% saw a price drop in July compared to their highest average transaction price, or ATP, during the first half of 2022.

The ATP for 3-year-old vehicles was $31,302 in July, a 4.6% decrease, which equates to $1,526. This is compared to their peak ATPs of $32,828 in January, noted Edmunds, which offers car buyers guidance on pricing across the automotive market.

Traditional forces impact market

The biggest reason for the price drop, Edmunds analysts noted, was a return to normal seasonal trends within the used car market after a prolonged run of manufacturing stoppages causing a dearth of new vehicles that caused the prices of new and used vehicles to rise to unprecedented highs.

From 2015 to 2019, the ATP for 2012 to 2016 model year (MY) vehicles consistently showed seasonal declines between January and July of 4.8 percent. But in 2020, the ATP for 2017 MY vehicles increased by 0.4%, and in 2021, the ATP for 2018 MY vehicles increased by 13.1 percent.

The price drops this year more accurately declines from pre-pandemic levels.

Expect this to continue throughout the year as owners continue to drive and rack up more miles on their vehicles, which continue to get older — all factors that drive down the price of a used vehicle.

In addition, buyers can expect prices on the 3-year-old vehicles to keep declining as a wave of near-new used vehicles two years old or newer hit the used market as trade-ins. 

Gas prices complicate shopping forecasts

Paul Jacobson, General Motors chief financial officer, also noted during a conference earlier month while discussing the performance of GM Financial that prices of used cars have begun to ease.

One complicating factor for used vehicle prices, however, is the shifting perspective of consumers, who once seemed irrevocably wedded to large trucks and SUVs.

Cox Automotive found some consumers are beginning to consider downsizing.

High gas prices caused truck and SUV shoppers to consider smaller, more fuel-efficient versions of trucks and SUVs, according to a Cox Automotive analysis of consumer shopping data on Kelley Blue Book. Large truck shoppers also considered electric trucks. Midsize SUV shoppers examined hybrid versions their top choices to their lists.

However, the picture is fluid, Cox analysts note.

With gas prices on a steady decline, consumers are lapsing into familiar patterns to some degree. Shopping for EVs and hybrids lost share in July and so far in August. Full-size vehicle shopping has inched up, according to Cox.

Stable global oil prices and modest domestic demand for gasoline led pump prices to fall a nickel in the past week to $3.84. Drivers are now benefiting from gas prices that are $1.17 less than their peak in mid-June, AAA reported.us

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